In October our average prudential balanced portfolio returned 5.31% (September 0.56%). Top performer is Prudential (6.61%), while Allan Gray (3.84%) once again takes bottom spot.

Local consumer goods and consumer services had an excellent run over a period of nearly 6 years to October 2011. Consumer Goods rose by 19.2% and Consumer Services by 15.6% per year, before dividends, over this period. Basic Materials, Industrials and Financials, in contrast, produced relatively pedestrian returns of 9.1%, 8% and 4% per year, before dividends, over this period. We do not expect too much more joy out of Consumer Goods and Consumer Services anymore and these should hence be underweight.

On the basis of fundamentals, one should now move to an overweight position in local Industrials and Financials that have not seen the growth of the consumer sectors. Basic Materials should now also offer some buying opportunities. An expected further depreciation of the Rand in the medium term would favor exposure to Rand hedge shares locally and an increase in foreign holdings.